AUGUST 06, 2020

The evolution of loyalty programs

Published by August 6, 2021

Loyalty Programs have survived the test of time, rather they have flourished. Since as back as we could trace, Loyalty rewards have been around to engage customers and promote retention. Today, they are much more sophisticated and exist in all forms to satisfy the requirements of merchants from conventional brick and mortar shops to online e-commerce platforms and everything in between. Let us dive into the history of how they came to become an important and essential part of marketing.

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The Beginning Phase

The introduction of loyalty programs can be traced back to the late 1700s It all started when retailers in America started giving customers copper tokens on their purchases. The customers could exchange these for future purchases. Gradually, it grew on to be a common practice for customer retention throughout the 19th century. Eventually, the copper tokens were proving to be expensive for retailers in the long run, and hence the concept of customer loyalty had to take a newer form.

Transition Phase

Later, in the 19th century, Green Shield Stamps were introduced. This, in a way, can be called as the first of retail loyalty programs. Customers collected stamps affixed to booklets and redeemed them at various markets, stores, and gas stations. This quickly became popular with customers as they used them widely.

A new idea was then introduced by Betty Crocker, a popular American baking company in 1929. They attached coupons to their baking mix ‘box tops’ that could later be redeemed for rewards. This gave birth to brand specific loyalty programs and made way for the biggest idea, we know today – the frequent flyer miles program.

Further Evolvement

In 1981, American Airlines launched the first ever frequent flyer program! American Airlines computerized databases and started rewarding their customers, thereby encouraging them to fly with them over competitors. The AAdvantage, at one point, was being viewed as the best frequent flyer program in the world. Their customers could redeem air miles for flights. Other airlines started entering the fray too. Customer loyalty programs had started gaining momentum and with more travel picking up, there were more customers looking to redeem air miles for flights and get more privileges.

From travel on to hospitality, in 1983 Holiday Inn was the first hotel to initiate a membership rewards program. This was followed by Marriott in the same year. Hotel reward programs were flourishing as it was being used as a customer retention strategy in an increasingly competitive market.

Modern Day Loyalty Programs

More than a decade later, loyalty cards entered the scene! In 1995, Tesco, the UK Supermarket brand, studied customer behaviour with the help of technology and started rewarding customers through loyalty cards! This revolutionized the loyalty industry. More cards soon started appearing across the various industries and sectors.

The 2000’s saw the boom of the digital era and with it came the advent of many global rewards programs, for example credit card rewards programs. Retail chains and hospitality brands propagated their customer rewards programs too. E-tailers started rewarding customers for engagement online, along with transactions. With the rise of ecommerce and digital solutions, mobile apps became the popular mode for rewarding customer loyalty.

To Conclude

Today, with marketing automation technologies, we are seeing the trend of the customer journey gaining vital significance as customers get rewarded at various steps. With data-driven marketing becoming mainstream, customer personalization is a vital key for the brands. Artificial intelligence is being applied to customer loyalty programs to further enhance and solidify the customer experience with the brands.

The Loyalty Programs have come a long way since its inception and keeps ever evolving for the betterment of customer engagement!